Chapter CVIII: Section 36: "The National Reserve Association shall have power to open

and maintain banking accounts in foreign countries, and to _establish agencies in foreign countries_ for certain purposes."

Have the Central Banks of England, France or Germany any power to maintain accounts and establish agencies in foreign countries? With "A baby stare," and under cover of "Sunday-school pretences," we are told that this all-comprehending scheme is just a simple coöperative enterprise for the exclusive benefit of the individual American banks. Indeed, that it is the only truly altruistic banking institution that was ever conceived.

Now, as the chief argument for the adoption of this scheme, its main promoters and sponsors have persistently declared that the country was now being dominated and controlled by certain great banking interests, and, therefore, that the people should liberate themselves from these sinister and dangerous banking powers by running into the warm and enticing embrace of the National Reserve Association. Upon investigation, we find this anomaly, this surprising, this astounding fact: that the promoters and advocates of this gigantic machine are these self-same sinister banking influences who have the country by the throat today.

Hon. Leslie M. Shaw has pertinently inquired, "Is it not strange that Nelson W. Aldrich and his affiliations are tired of their great power and vast opportunities, and are now trying to divest themselves of them," through the innocent-looking National Reserve Association? It will be well remembered by all of you, that at the time that the Aldrich scheme made its first bow to the dear people, the public discovered that the National City Bank owned bank stock to the amount of $10,000,000 in other National Banks located throughout the United States. Possibly the same interests owned several times that amount. I was informed about that time that they controlled at least one hundred banks in the leading cities of the United States. Now, let us assume that to be true, and let us meditate upon what such an organization could accomplish if they wanted to elect every officer in every local association, and every officer in charge of every branch, and the board of directors of the National Reserve Association, and so name the "_Governor_" and the rest of the executive committee of nine which is to control this great Central Bank.

To appreciate the power of such an organization, you must keep in mind the fact that practically every bank in the United States would be carrying a balance with some one of these banks immediately under their control. There is your machine. It is a perfect duplicate of the political machine in this state. The state "Boss," whom you know stands in precisely the same position as the National City Bank would stand.

As you are fully aware, I am the "Boss" of this county; and I am in identically the same position that one of these hundred banks would be that are controlled by the National City Bank. When I get my orders, I immediately communicate with every so-called local leader in every township. This political machine works three hundred and sixty-five days and three hundred and sixty-five nights in the year. In the sense of an organization, we are working all the time, and it is the organization work that does the business. All the rest of the people are unorganized. So it would be with the banks. The men who belong to the organization or machine "_like it and fear it_"; because as things have stood, no one could get anywhere without being a part of the machine. This fact forces acquiescence. It has been, as you know, a perfect feudalism from top to bottom. We have had a machine government in this state as perfect as the Manchu Government in China.

Can you imagine anything easier than for the National City Bank with this complete banking organization all over the United States to name every man practically that went into this organization from top to bottom? This would not be done by holding a majority of the stock in all the twenty-five thousand banks; they don't care about that; because it is a matter of no consequence to them, and if they attempted to do anything so crude, it would spoil their whole game. They attain their ends in more subtle but no less certain and powerful ways. They get influences to work. They put forces into operation. Their interests are not limited to the banking business. They have affiliations with great transportation companies and manufacturing interests, and therefore control large bank deposits everywhere that the banks want and are always working to get. Then there are favors to be granted; commissions to be paid; "melons to be cut." Opportunities are suggested. In one respect at least they are like the Lord, they "work in a mysterious way their wonders to perform."

They had established their ramifications throughout the United States by making the National City Bank a holding company of bank stocks, and the culmination of their power was to be realized through the devious methods of organizing the National Reserve Association. The same money and the same power that filled the columns of the newspapers of the country with the unqualified praise of the Aldrich scheme for two years--the same power that rushed resolutions of one uniform stereotyped kind through twenty or thirty state bank associations, and steam rollered the same unconsidered declarations through two annual conventions of the American Bankers' Association, would have made this so-called _altruistic, benevolent, coöperative association_ the most powerful machine ever organized; because, it would have absolutely dominated all the bank credit in the United States, or 45 per cent of the banking power of the world. You must remember that these interests are by far the greatest speculators in the United States. Yes, the greatest in the world.

MR. BANKER: But don't you remember that the bill provided in Section 26 that the paper rediscounted by it must "be issued or drawn for agricultural, industrial, or commercial purposes," and not "for the purpose of carrying stocks, bonds, or other investment securities"?

MR. LAWYER: Yes, but that is all folderol. It is the purest kind of poppycock. If a bank wanted to take on a speculative deal, it could sell its commercial paper, could it not, and use the money for speculation just the same? That is on precisely the same level with its declaration that the institution was not a Central Bank. It is such subterfuges that disgust every candid man.

Listen to Mr. Aldrich in his report upon the bill upon the selection of the "Governor" of the National Reserve Association by the President of the United States. He says, "Further restraint upon the administration of the association upon narrow or selfish lines, is imposed by the provision that four of the highest officials of the Government are made ex officio members of the controlling board, _and by the requirement that the governor shall be selected by the President of the United States_. The fear has been expressed that the _selection of the governor by the President_, and the provisions making the Secretary of the Treasury, the Secretary of Agriculture, the Secretary of Commerce and Labor, and the Comptroller of the currency, ex officio members of the board of directors of the reserve association, _might lead to an attempt to control the organization for political purposes_."

Please note the sham, fraud and false pretense covered by this comment. The bill provides that the "Governor" of the association, as they call him, shall be selected by the President of the United States _from a list of at least three names, furnished by the directors_. Will any honest man say that the President of the United States would have had any more to do with the selection of the "Governor" of the so-called National Reserve Association than the King of Siam? Again note this cheap, false pretense, "Fear has been expressed that the selection of the governor by the President," and the four ex officio members of the board of directors, "might lead to an attempt to control the organization for political purposes." These four ex officio members have just four votes upon a board of forty-six which proceeds immediately to eliminate all of the ex officio members forever, by selecting an executive committee consisting of nine members to manage its affairs, from which all of them are excluded except the Comptroller of the currency. Can any intelligent man doubt the purpose of all these sham declarations and false pretenses? If so, let him spend a day or two trying to find out how the members of the boards of the local associations are to be chosen; try to unravel the process by which the members of the boards of the branches are to be evolved; and, having grown tired and dizzy with his task, let him undertake to prove how the board of directors of the National Reserve Association are to be manufactured through the machinations born of ulterior purposes.

I have studied puzzles before, but for complications, wheels within wheels, evident designs upon evident designs, occult purposes under occult purposes, and a combination of powerful forces, born of sinister influences, this project will forever stand alone as an illustration of what the human mind can do to conceal its real object.

There is not one man in a hundred, indeed I do not believe that there is one man in a thousand, taking the business men, farmers, working men, and bankers all together, who can solve the riddle, and tell how it is done. Such a mystery could not have just happened. It must necessarily have been the product of a purpose.

_Simplicity, publicity and direct methods are the guaranties of common honesty. Intricacy, secrecy and indirect methods are invariably used to hide uncommon dishonesty. I do not mean petty larceny, taking a few pennies, or a loaf of bread; but the absorption of hundreds of millions, without returning anything to the world in exchange for them._

Should the United States have been so unfortunate as to have been bound hand and foot for fifty years, the life of the proposed charter, by the trammels and intricacies of the National Reserve Association under control of an executive committee, consisting of only nine men who had been the evolutionary product of a preconceived purpose and well-defined plan, can anyone doubt what the result would have been? Can anyone doubt that all of their banks and all of their business interests would have gotten all the money they wanted all the time?

The advanced information from week to week and, at times, possibly, a month ahead, of what the discount rate would be--a very natural way for some member of that executive committee to show his or their proper appreciation of his or their promotion to their positions--would have been worth more every year, during the fifty-year grant, than all the wealth that the American people could produce during any twelve months; for this advanced information about the discount rate would have made profits a mathematical certainty upon the billions and billions of stocks and bonds that are quoted upon the Stock Exchange, the fertile field of the man who knows that he has a sure thing.

MR. MANUFACTURER: Mr. Lawyer, that smells pretty bad.

MR. LAWYER: Yes, I admit it; but does it smell any worse than oil has been smelling for more than twenty years? Than certain United States senators have been made to smell? Than robbing rebates smell? Is it not the natural sequel to this train of abuses to which the country has been treated?

This whole situation was so graphically depicted, precisely as it has developed, two years before Mr. Aldrich gave birth to this conception, that I want to read it to you:

"A central bank could easily be so organized as to sap the commercial blood of this country at every turn and direct the silent and unseen currents of advantage into the channels of favored institutions, and all these favored institutions might turn out, upon investigation, to be, in the end, one institution.

"And if, unfortunately, the subterranean connection could not be detected, and even if detected, could not be broken, what a power for evil and injustice such an organization would prove in the life of this Nation.

"This is not only regarded as possible, but as probable; indeed, it is charged that it is the preconceived, cunning design of the advocates of a central bank to accomplish this purpose.

"Under these circumstances, with what suspicion and jealousy will every act of the central bank be watched! Localities will become envious of localities. Cities will bitterly attack their neighboring cities. Nine-tenths, if, indeed, not ninety-nine out of every hundred, of the banks will imagine spears in needlecases, and, right or wrong, fling their accusations upon the wings of the wind; and we will be living in a commercial world of unrest and constant controversy surpassing in suspicion, envy, jealousy and bitterness anything this Republic has ever witnessed. The consequences no man can prophesy; no imagination can paint."

These words were spoken by Hon. Charles N. Fowler, March 29, 1908, just two years before Mr. Aldrich made his report to Congress upon his National Reserve Association.

MR. LABORINGMAN: You know I said that I had heard that the Aldrich Bill was dead; for one, I hope so. If the people ever get a lick at it they will finish it for certain.

MR. FARMER: You are right, and you bet that if they ever get a chance to discuss this banking bill question, they will come mighty near settling upon the right proposition in the end.

MR. BANKER: I agree with you, and furthermore I am thoroughly convinced that we shall never reach a satisfactory conclusion until we have had just the same kind of a hand-to-hand fight over this question that we had over the gold standard.

MR. MANUFACTURER: It looks so to me. That gold-standard fight taught me that you could trust the American people to make a wise decision, if you would only have a country store, schoolhouse, cornfield debate, in which every man in the country got into the game--preacher, lawyer, teacher, farmer, merchant, manufacturer, laboringman, townfolks and country folks, all alike.

MR. MERCHANT: Nothing more true has been said since we have been talking about this question than that remark about the importance of a public discussion of this whole matter. I know any number of men who when this Aldrich scheme came out were ready to swallow it, but who now realize what a fatal blunder it would have been. The reason was, that they knew absolutely nothing about the question and they were living in such a state of terror on account of the panic, that they were ready to take anything that would shield them from experiences such as they had just passed through. The Aldrich scheme was the only thing in sight, because hundreds of thousands of dollars had been spent in promoting it. They are just beginning to study and think about the subject. Our hope of wise action by Congress rests upon a red-hot debate among the people, exactly as you said.

MR. BANKER: Well, it will be easy enough to show them what the real reforms demanded are.

_The reforms we demand are these_:

_First: Holding companies in the banking business must be completely wiped out._

_Second: Every National Bank should be authorized to do_

_(1) A commercial banking business._

_(2) A Savings bank business._

_(3) A Trust company business._

_(4) A note issue business, precisely as the Canadian banks do._

_Third: All the various accounts--commercial, savings, trust and note issues--should be segregated._

_Fourth: Every bank in the United States should be compelled to carry the same amount of bank reserves._

_Fifth: All bank reserves should consist of gold or gold certificates, as soon as the United States notes can be converted into gold certificates._

_Sixth: Every bank in the United States should be brought under national control, because banking is essentially Interstate Commerce._

_Seventh: Every natural financial centre in the United States should become the clearing centre for all the checks, drafts and bank notes that are payable in the territory that is economically and naturally tributary to that Financial centre; such territory should constitute a commercial zone._

_Eighth: There should be organized at each of these financial centres a Clearing House at which all the checks, drafts and bank notes payable within the commercial zone shall be at par._

_Ninth: The banks of each commercial zone should elect a board of control to examine, supervise and control all the banks within such commercial zone, precisely as the Clearing Home bank examiners are examining and supervising all banks clearing through them today._

_Tenth: The banks of each commercial zone should also elect a court of appeals, or a banker's council, composed of an equal number of business men and bankers, to settle all banking and business questions that would properly come before them._

_Eleventh: The Board of Control in each commercial zone should be presided over by a deputy United States Comptroller, for the purpose of securing immediate and efficient action._

_Twelfth: The banks of the United States should all contribute a percentage of their deposits to a Central Reserve, which should be composed of gold, and gold alone. The percentage of deposit should be 7 per cent at the outset, and be gradually increased to 10 per cent, which would amount, at the present time, to a central gold reserve of upwards of $1,250,000,000. This reserve would correspond to the reserve held today by the Clearing Houses for their banks._

_Thirteenth: This central gold reserve should be held in trust by a body of men composed of one man from each commercial zone, for the benefit of all the commercial zones._

_Fourteenth: Each Board of Control should have access to this central gold reserve, and should have power to sell gold to any bank within its zone and under its supervision, in case it desired it for the purpose of moving crops or for any other legitimate reason. The practical result would be, that the gold would be held, to a large extent, at the financial centres, and under the command of the Board of Control, precisely as the Clearing House committees today hold the reserves of the banks constituting their respective Clearing Houses._

_Fifteenth: The use, distribution and control of the central gold reserve should be under the management of the representatives of all the commercial zones, who should be composed equally of business men and bankers._

_Sixteenth: For the purpose of establishing responsibility and securing efficiency, the representatives of the zones should act through corporate powers granted by the National Government._

_Seventeenth: The purpose of a national centralization of gold to so large an extent is two-fold:_

_(1) It brings all the banking power of the United States to the defense of the commercial interests in every part of the United States instantaneously._

_(2) It will give to the representatives of the zones the power to control and direct the movement of gold to and from the United States, by fixing and enforcing a price for the use of gold, or a discount rate for gold transactions throughout the United States._

_These reforms are based upon three distinct propositions:_

_First: They incorporate the principles of a central gold reserve, as illustrated by the Bank of England, where all the transactions are in gold, and gold alone, without the use or intervention of bank credit in the form of bank credit notes, which could be used for reserves by the banks throughout Great Britain._

_Second: They incorporate the principle of bank credit currency, as illustrated by the bank note system of Canada, which involves daily redemption in gold coin through the clearing houses._

_Third: They extend to every economic or natural commercial zone the established and approved practices of the American Clearing Houses, that is:_

_(1) Bank supervision and control over all members._

_(2) A reserve created by all the members of the Clearing House and held by the Clearing House Committee for the benefit of all the members._

_(3) Such a free check system over every commercial zone, precisely as New England has had since 1899, and as has just been established over a large territory around New York by the New York Clearing House._

_The result of these reforms would be:_

_(1) To make each individual bank absolutely independent, because it has an unlimited resource in the coöperative gold reserve._

_(2) To make every commercial zone as free and independent of every other commercial zone, as England is of France, or France is of Germany._

_(3) To completely decentralize all bank credit in the United States, while it centralizes the gold to a degree that would enable us by raising the discount rate to close the door of our markets against the demands for gold from abroad._

_(4) To insure all depositors in National banks against loss._

_(5) To liquefy and therefore develop a general market for commercial paper._

_(6) To save the business interests of this country more than $200,000,000 every year, to say nothing of the incalculable losses growing out of our ever-recurring panics._ #/

MR. LAWYER: Mr. Banker, you have stated with great clearness and precision just what our investigation has demonstrated should be done to give us a sound and economical financial and banking system.

After a careful consideration of the question, I am prepared to say that the Aldrich scheme would not accomplish or effect a single one of these reforms.

On the other hand, I am convinced that, while it would give us temporary relief, immediately there would follow undue expansion. In quick succession there would come wild inflation, a vast amount of gold would be expelled from the country and we would find ourselves in the end in far greater and more serious difficulties than those from which we are now suffering.

MR. BANKER: Your conclusion is in perfect keeping with my own. It seems to me very remarkable how many people were temporarily misled by its claims, but have since turned from it and are now opposed to it.

MR. LAWYER: I do not think that is either remarkable or strange, when you recall the mental condition of the whole country, due to the panic; the vast amount of money poured into its propaganda; the claims made for it and the fact that it incorporated some things that the public realized ought to be done.

For example, it proposed to divide the country into districts, an idea that Congressman Fowler had advocated ever since 1897 or for more than fifteen years, and had incorporated in his bill of 1908.

The Aldrich scheme provided for a Central Reserve, but composed almost entirely of United States bonds, United States notes and silver in some form, a fact that did not attract the attention of the public at the outset.

It proposed to make an unlimited market for the rediscount of paper, a most pleasing thought to contemplate until it was discovered that this was to be done by "replenishing" the reserves of our 25,000 banks "indefinitely," as Aldrich said, with bank debts in the form of bank notes issued by the so-called "Reserve Association." It incorporated the plan proposed by Congressman Fowler in his bill of 1908 for converting the "_Two per cent United States bonds_" into "_Three per cent United States bonds_," a fact that impressed the National banks favorably.

The so-called Association was given an attractive name--"National Reserve Association," also borrowed from the first draft of Congressman Fowler's Bill of 1908, with only a slight change. He called his central reserve, "United States Reserve Association." Finally, owing to the clever presentation of the scheme, the country took to it at the start, because they wanted something done and they hoped that the scheme was what Mr. Aldrich declared it to be, when he said, "The plan we propose is, essentially, an American system, scientific in its methods and democratic in its control."

Every intelligent man now knows that the system he proposed was the German system from top to bottom, which broke down completely under the first real test, which came in 1911.

Every man who calls himself an economist must admit, instead of its being scientific in character, it was constructed in absolute defiance of all economic law, and now the public is convinced that instead of being democratic in control, it was intended to be a gigantic "_Central Bank_" with fifteen branches over which a "_Governor_," a name wholly foreign to American banking institutions, and his seven associates were to rule, the "_Governor_" appointing his assistant managers over the fifteen branches as if it were a Manchu dynasty and not a democracy at all.

Thus one by one the economic blunders have been pointed out; one by one the sinister motives have been exposed; one by one the false pretenses have been unmasked, until there is left only a recollection of the impression made by the expenditure of hundreds of thousands of dollars in this futile attempt to enslave all American bank credit and the lesson of extreme caution and a most urgent need on the part of every citizen in every walk of life, of study, diligent study, if he desires to perform a truly patriotic duty and be of some real service to his country in this hour of peril, inspired only by unselfish motives and a sincere devotion to the welfare of the whole people.

MR. MERCHANT: Mr. Lawyer has certainly succeeded in pointing out very clearly the things that _must be excluded_ from our bill.

MR. MANUFACTURER: And Mr. Banker has certainly succeeded in pointing out very clearly the things that _must be included_ in our bill.

MR. LABORINGMAN: Well, then, if we are all sure that we are right, let us go ahead.

MR. FARMER: We will; and as our forefathers fought for the birth of this nation we will fight for its life.

UNCLE SAM: Boys, I shall live only through your intelligence, your courage, your justice, your honor, your patriotism, your service, your sacrifice; and I shall be immortal only if all those who come after you shall possess these same virtues.

FAREWELL.